In the best year for the freight transportation industry since the Great Recession, logistics managers chalk up efficiencies that drive further U.S. economic growth. However, capacity issues persist, causing shippers to worry about rate hikes as carriers continue to be meticulous in their partnerships.

Does your organization struggle with the integration of information between your internal systems, processes and partner portals? You're not alone! Kapow Software alongside EFT has surveyed over 200 organizations regarding the importance of information access, visibility and discusses some of the major goals for supply chain and logistics organizations.

During this webcast we'll explore how supply chain execution convergence (SCEC) helps break down the barriers resulting from disparate, fragmented technology solutions allowing you to more effectively serve customers, adapt to changing business cycles, and save both money and resources.

The Association of American Railroads (AAR) said today that the seven North America-based Class I freight railroads are on track to invest a record $13 billion in capital expenditures for 2012, with the capital going towards expanding, upgrading, and enhancing the U.S. freight rail network.

The AAR also reported that these seven railroads plan to hire more than 15,000 employees in 2012, with many of these positions allocated towards replacing retired workers and new positions.

In May 2011, the AAR released a report, entitled “Great Expectations 2011, Railroads and Continued U.S. Economic Recovery,” which stated that the seven Class I’s were planning to spend $12 billion in 2011 capital expenditures, following a $10.7 billion investment in 2010.

An AAR spokesperson told LM that a final 2011 figure was not available at this time, adding that a figure may be available later in the fourth quarter.

“Unlike trucks, barges or airlines, America’s freight railroads operate on infrastructure they own, build and maintain themselves so taxpayers don’t have to. And this year they are investing at a record rate to meet the demands of the recovering economy,” said Edward R. Hamberger, AAR President and CEO, in a statement. “These investments help businesses get their goods to market more efficiently and affordably, so they too can innovate, invest and hire. That’s how freight rail spurs the American economy and supports jobs all across the country.”

AAR officials added that with hundreds of infrastructure projects underway, privately-owned freight rail networks are maintained through these capital expenditures that have been at record levels for the last three years. And they explained that these investments have gone towards things like intermodal terminals that facilitate truck to train transport; new track, bridges, and tunnels, modernized safety equipment; and new locomotives and rail cars, among others.

Some notable examples of this spending at work include:
-the Heartland Corridor, a public-private partnership between NS and Virginia, West Virginia, Ohio, and the federal government to create the shortest, fastest route for double-stack containers moving between the Port of Virginia and the Midwest; and
-the National Gateway, a roughly $850 million public-private partnership (PPP) infrastructure initiative designed to provide a highly efficient freight transportation link between the Mid-Atlantic ports and the Midwest. Class I railroad CSX is a major stakeholder in this effort.

The AAR also pointed out that over the past few years these Class I railroads have invested about 17 percent of their annual revenue on capital expenditures, whereas the average U.S. manufacturer spends about 3 percent on capital expenditures.

These capital expenditure investments, said the AAR, are funded by private capital and not taxpayer funding, adding that the railroad industry owns, maintains, improves and pays taxes on their rights-of-way.

Other costs included in capital expenditures include maintenance, with 20 cents of every revenue dollar going back into maintaining, expanding, and improving the U.S. rail network over the last ten years.

What’s more, these investments come at a time when the AAR has voiced concern over myriad pieces of legislation that threaten their ability to continue to make investments at these levels. Examples of this legislation include the Positive Train Control mandate, legislation attempting to remove antitrust exemptions currently only granted to the railroad industry; and an ongoing push to expand truck size and weight.

While the railroads continue to plead their case for federal regulations to remain in their current form, railroad shippers and rail shipper groups continue to maintain that they are suffering from increased rates and decreased quality of service.

“For too long, the market has been blocked from setting fair prices for shipping products via rail, which has hurt shoppers, exporters, farmers and manufacturers,” said Glenn English, chairman of Consumers United for Rail Equity (CURE), a railroad shipper group.

But railroad executives continue to counter that theory, explaining that the existing regulatory railroad environment for has produced—for North American railroad shippers—a freight railroad system that is the best in the world. And if the railroad industry lost the ability to earn its cost of capital it could have a negative effect on capital investments to support traffic growth and reverse the strides made post-Staggers Act in the areas of rail safety and service reliability.

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!

Get timely insider information that you can use to better manage yourentire logistics operation.

Recent Entries

While many industry analysts contend that distribution centers near U.S. East Coast ports will see a surge of new business after the Panama Canal expansion, real estate experts say this phenomena is already underway.

A new Government Accountability Office report on the effects of changes to truck driver hours of service rules has sparked a war of words between the American Trucking Associations and Federal Motor Carrier Safety Administration, the arm of the Transportation Department that is in charge of making those rules.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement partners Canada and Mexico in May dropped 10.8 percent annually to $92.7 billion, following a 6.8 percent annual decline to $93.3 billion in April.

Rumors of transportation and logistics titan UPS acquiring Chicago-based transportation management services provider Coyote Logistics for $1.8 billion have become a reality, with UPS announcing today that the deal is now official.